No more spectrum allocation till 2G report finalized, says Finmin

No more spectrum allocation till 2G report finalized, says Finmin

New Delhi: In what may be a blow to mobile phone operators, the finance ministry has asked the department of telecommunications (DoT) to ensure that no allocation of spectrum is made till a panel’s report on second generation (2G) spectrum is finalized.

The spectrum committee, chaired by Subodh Kumar, additional secretary in DoT, had recommended in its report in May that 2G spectrum should be auctioned, as is done in most countries, and not allocated as per subscriber linked criteria, as is done currently.

It also recommended that telecom companies be allowed to buy, sell and transfer spectrum for a fee.

The committee included representatives of the government, the Telecom Regulatory Authority of India (Trai), telecom technology experts and industry executives.

It was formed in June 2008 to resolve a number of controversies surrounding the government’s 2G spectrum allocation policy.

DoT sent the report to the telecom regulator on 7 July asking for its recommendations on the 2G spectrum report.

As per regulations, Trai has to launch a consultation process and garner views of all stakeholders before issuing recommendations. This process can take several months.

Second generation or 2G spectrum refers to the airwaves on which mobile phones in India operate.

The advanced third generation (3G) spectrum, has so far been allotted only to state-owned operators Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL).

On 31 March, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had asked DoT not to allocate more spectrum till the committee’s recommendations were implemented.

Thus far, India’s telecom operators have been receiving spectrum beyond 6.2MHz on the basis of the number of subscribers they have.

“It may be ensured that no further allocations of spectrum are made by the DoT, until a final view had been taken on the recommendations of the report," finance secretary Ashok Chawla said in a letter to DoT secretary Siddhartha Behura. “Moreover, keeping in view the proposed indexation of 2G spectrum prices to the derived price of 3G auction, it would be necessary to conclude urgently the process of auction of 3G spectrum, before giving effect to the report’s recommendations."

Telecom operators as well as analysts say this would hurt cellphone services, in the meantime.

“Till the decision on the allocation of more spectrum can be made, quality of service is getting affected as there is only so much an operator can do to improve quality of service without additional spectrum," a senior executive with a telecom operator said on condition of anonymity.

India’s largest telecom companies, Bharti Airtel Ltd, Reliance Communications Ltd, Vodafone Essar Ltd and Idea Cellular Ltd, are awaiting additional spectrum in several circles as they have reached the prescribed subscriber base, making them eligible for additional spectrum.

“In order to keep up a certain level of quality of service, the operators would have to build more cell sites and add more signal boosters, which mean a significant rise in the capital expenditure," an analyst with a Mumbai-based brokerage said, again on condition of anonymity as he’s not authorized to speak to the media. “If they don't deploy this extra capital expenditure, they will start losing customers."

Besides, smaller and new operators such as Datacom, Unitech Wireless and Swan Telecom are yet to get even start-up spectrum in many regions delaying their launch of operations.

“One has to also keep in mind the implications of the S Tel judgement," said Mahesh Uppal, director, Com First (India) Pvt. Ltd, a telecom consulting firm.

The Delhi high court on 3 July, quashed a DoT notification fixing 25 September 2007 as the cut-off date for granting telecom licences bundled with start-up 2G spectrum.

Earlier, the deadline for allocation of licence was 1 October 2007. In January 2008, DoT amended this criteria and said that due to a large number of applications, only requests made before 25 September 2007 would be considered.

In its ruling the court had said: “The DoT could not be allowed to arbitrarily change the cut-off date and that too without any justifiable reasons."

The court’s direction came over a petition filed by Chennai-based S Tel Ltd, whose application for licence in 16 circles was turned down as it had applied on 28 September 2007, three days after the cut-off date.

“A huge number of applications for licences bundled with spectrum were rejected due to this change of date. The government would have to relook the applications made after September 25, which are huge in number," Uppal said. “There is not enough spectrum for all these operators and...the problem gets solved by auctioning the spectrum."